Is the Recession Starting?

Posted Jan 4, 2016 by Martin Armstrong

The ISM purchasing managers’ index for the manufacturing sector in December 2015 in the USA has plummeted to its lowest level since June of 2009. This warns that the U.S. economy is entering a recession that is in line with the forecast of the ECM and the rise in the dollar.

However, keep in mind that this is simultaneously coming with the changing technology trend. By that, we mean that low-level jobs are being replaced rapidly by automated computers, in part, because of Obamacare and its Draconian tax burden upon business exceeding 25 employees. Therefore, unemployment will rise due to this expansion in technology and raising the minimum wage will accelerate that trend further.

In business, inventories are also shrinking as companies move to “just in time” methods by using technological advancements to minimize carried inventory. This trend is only further accelerated by the banks moving toward transactional banking where they are no longer interested in relationship banking. This also reduces the availability of loans for small business as banks do not want the risk.

The convergence of these trends will feel the recession ahead. Eventually, this will materialize in rising unemployment, a deepening crisis in student loans, and the fiscal mismanagement of governments demanding more and more taxes which will become a toxic cocktail of doom.

The ultimate rise in stocks in the years ahead (after a correction sling-shot move) will unfold simply as capital tries to secure its future by getting out of government bonds and banks.